IR3R Form question

[Monsterbishi]

I'm sorting out my IR3R ready for the end of this month - (it's my first time using one of these)

With regards to the amount listed as far as expenses being claimed, we have owned out rental for 11 months of the financial year - so am I correct in thinking that I reduce the values of all the expenses claimed by 1/12th?

On the form it has a box which asks how many months the property was occupied for, but I presume they don't use this to reduce the amounts listed?

[eri]

am no accountant sp will be interested in seeing others replies

but

i think you'd claim all your expenses for the 11 months...the previous owner can claim the expenses of the other month

i suspect the months rented box is just a check to make sure your expenses and rentals look legit

ie if you only rented it out for 1 month but wanted to claim the years expenses they wouldn't be happy...ie holiday homes + book-a-bach

[Anthonyacat]

You include all expenses claimed on the IR3R.

You only claim expenses you have paid for.

Is not too hard a system - but if you'd like any help, there is probably an accountant around here somewhere who would offer to do this sort of work for you in exchange for payment.

[Halfway To Paradise]

From my experience using an accountant pays for itself very quickly, and is also tax deductible. Another benefit of using an accountant is the reduced risk of having you accounts audited, which would be a nightmare and very stressful if you were doing accounts yourself.

[Anthonyacat]

Absolutely. I've only ever heard the 'reduced risk of audit' thing colloquially, am not sure it's official policy. But the assistance during an audit is a big deal. Not to mention a CA can often head off an audit prior to it starting by promptly providing the right type of information when first asked.

[Monsterbishi]

My apologies if this sounds abrupt, I do appreciate all the replies - but why bother having a 'finance, legal and tax' section of the forum if you're just going to respond to even simple questions with 'Go pay someone else to do it instead'?

[Anthonyacat]

That was certainly abrupt.

If you'll notice, both Eri's response and my own answered your question directly, prior to any mention of paying anyone. It was, as you say, a simple question. You got a simple answer, and the thread moved forward.

[artemis]

The IRD publication IR264 - Rental Income - covers this situation. See page 11. As I understand it, ongoing costs (interest, rates, insurance) cannot be claimed if the property was empty or not available for rent. Maintenance can be claimed even if empty unless it is capital improvements. Which it mostly would be classed as if done right after purchase. Ongoing costs can however be claimed if property is empty for a short time for maintenance.

Useful booklet.

[Anthonyacat]

A few ambiguities there, as usual. But it is a useful booket.

To be clear on the above, you can claim interest/rates/insurance/maintenance if the property is empty, so long as it is available for rent - or undergoing brief maintenance/renovation in order to make it available for rent.

Some 'maintenance' is considered to be a capital improvement. As Artemis has said often this is due to spending the money directly after purchase, but it can also be at other times whenever you are repairing something and substantially upgrade it.

[Lanthanide]

I suspect what might be missing in all of the replies so far, is the matter of apportionment that you brought up.

Basically you can claim for 11/12ths the expense of anything that is annual, eg rates, insurance, mortgage interest or any other types of annual overhead fee.

If you did some maintenance (that doesn't fall under the capital improvement provisions), say you replaced a leaky tap and it cost $100, then you can claim the full $100.

[Anthonyacat]

But you don't claim 11/12ths of expenses. You claim the expenses you paid for, as I said in the first post, and Eri on the one before.

If someone owns a place for 3 months, they only pay 3 months worth of interest, rates, etc. That's what they claim. Why would you further reduce that? If they paid insurance or rates or whatever annually in advance, they claim that too.

There's no 'apportionment' relevant at all.


If this were a property that was owned as a home first, and then rented for 11 months - absolutely you apportion. But the OP appears to be talking about a new purchase.

[Lanthanide]

Right, and now you've given the level of detail that I believe the OP wanted - apportionment only matters if the house was converted from an existing OO home, but that doesn't apply in this case.

[Monsterbishi]

In this instance, yes, the property is one that we've owned for 11 months of the financial year and has never been our PPOR.

[Wayne]

In this instance, yes, the property is one that we've owned for 11 months of the financial year and has never been our PPOR.

Chattels depreciation is apportioned though - you claim 11/12ths for the 1st year and full depreciation after that.
Same for buying any new chattel during the year.